We’re now at last minute, Obama says, calling for agreement

WASHINGTON (MarketWatch) — Senate leaders on Saturday were trying to come up with a deal to avert the looming fiscal cliff of tax increases and spending cuts, after emerging hopeful on Friday from a White House meeting with President Barack Obama and top House lawmakers.

Speaking late Friday, Obama said: “I’m optimistic we may still be able to reach an agreement that could pass both houses in time.”

Reuters

Senate Majority Leader Harry Reid returns from the Christmas recess to the U.S. Capitol.

If Senate Majority Leader Harry Reid and Senate Republican Leader Mitch McConnell can’t strike a deal, the president added that he would ask Reid to bring to the Senate floor a bill to renew middle-class tax cuts. Obama reiterated those points in his weekly radio address Saturday.

Automatic spending cuts and the expiration of Bush-era tax cuts are set to go into effect Jan. 1 if Congress can’t reach an agreement.

Reid, speaking on the Senate floor after the late-afternoon meeting Friday, said the next 24 hours would be “very instructive” about coming to terms. McConnell said he was “hopeful and optimistic” about striking a deal, and that he wants to present something to his fellow Republicans by Sunday.

Reid and McConnell spoke after the markets closed on Friday. Reid conceded that any near-term patch arrangement would be “imperfect.”

The New York Times reported Friday that Obama would offer at the meeting to extend current tax rates for incomes of $400,000 and under. This is above his previous offer of extending current tax rates for incomes up to $250,000. But even that level may be too high for Republicans to accept without concessions by Democrats.

Obama also wants any agreement to extend expiring unemployment benefits.

The last-ditch talks at the White House were aimed at averting a wholesale plunge over the fiscal cliff — the popular term for $110 billion in automatic spending cuts set to take effect in 2013 and the expiration of Bush-era tax cuts. Read more fiscal-cliff coverage on MarketWatch.

Without a fiscal-cliff deal, a payroll-tax holiday enacted under Obama would also expire. About $1.2 trillion in spending cuts begin to kick in, at a rate of $110 billion a year over 10 years. The cuts are split among Pentagon spending and other federal expenditures. Federal unemployment benefits would expire for 2 million jobless Americans as well.

Going over the cliff for a short time remains a possible option. Lawmakers opposed to tax increases could then vote to lower the taxes that have gone up, affording themselves political cover.

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